{"id":388,"date":"2022-08-11T01:01:00","date_gmt":"2022-08-11T01:01:00","guid":{"rendered":"https:\/\/bluegemresearch.co.za\/?p=388"},"modified":"2022-08-10T13:43:15","modified_gmt":"2022-08-10T13:43:15","slug":"renergen-key-due-diligence-is-successful","status":"publish","type":"post","link":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/?p=388","title":{"rendered":"Renergen &#8211; Key Due Diligence Is Successful"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><em>Share Code: REN \u2013 Market Cap: R4.6bn \u2013 PE: -124x \u2013 DY: 0.0%<\/em><\/p>\n\n\n\n<div class=\"wp-block-file\"><a id=\"wp-block-file--media-09d7b8f9-ab02-4457-b4df-f17b75d4405b\" href=\"http:\/\/v5j22kvl0zh.c.updraftclone.com\/wp-content\/uploads\/2022\/08\/Renergen_Ad-Hoc-Note_11-August-2022.pdf\">Renergen &#8211; CEF Update Note &#8211; 11 August 2022<\/a><a href=\"http:\/\/v5j22kvl0zh.c.updraftclone.com\/wp-content\/uploads\/2022\/08\/Renergen_Ad-Hoc-Note_11-August-2022.pdf\" class=\"wp-block-file__button\" download aria-describedby=\"wp-block-file--media-09d7b8f9-ab02-4457-b4df-f17b75d4405b\">Download<\/a><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Central Energy Fund: Due Diligence Successful, Fair Value Implied<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Following Ivanhoe Mines\u2019 option expiring (<a href=\"https:\/\/v5j22kvl0zh.c.updraftclone.com\/?p=383\">see our previous note<\/a>), questions surfaced about the <em>reason<\/em> for this expiry &amp;, indeed, whether it involved the quality of the Virginia Gas Project (VGP).<\/li><li>Concurrent to Ivanhoe\u2019s deal, Renergen was fielding a due diligence (DD) by the Central Energy Fund (CEF) for a 10% stake in VGP for R1bn. This DD has successfully concluded and both parties are now seeking final approvals to complete the transaction.<\/li><li>This is an important event for at least three reasons:<ol><li>The positive DD by CEF confirms the <strong><em>quality<\/em><\/strong> of the VGP,<\/li><li>Assuming final approvals are received, this injects R1bn of equity <strong><em>funding<\/em><\/strong> into the Phase II funding, &amp;<\/li><li>This solidifies an arms-length R10bn <strong><em>valuation<\/em><\/strong> for VGP (i.e. if 10% is worth R1bn, 100% is worth R10bn).<\/li><\/ol><\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Our Thoughts: Much Better Price + Less Dilution<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Above, point (3) implies that REN\u2019s 90% stake is worth R9bn or c.6660cps (= R9bn\/135.1m shares) versus our previous fair value of 6337cps &amp; the share\u2019s current market price of 3460cps.<\/li><li>Ivanhoe\u2019s option would have come in at a discount to the current <em>market<\/em> price (if exercised) &amp;, thus, the CEF\u2019s deal is a <em>lot<\/em> less dilutive for shareholders and ensures a much large proportion of the eventual VGP value likely accrues to existing shareholders.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Valuation and Implied Return: Unchanged<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>We are currently reassessing our valuation and model for REN and will publish this in due course.<\/li><li>Despite that &amp; due to the CEF deal\u2014assuming no deterioration in exchange rates, commodity prices or interest rates\u2014we believe that the previously communicated valuation at least guides towards a floor value of the Group. Previously, we saw REN\u2019s fair value as around 6337cps &amp; 12m TP of about 7491cps.<\/li><\/ul>\n\n\n\n<div class=\"wp-block-file\"><a id=\"wp-block-file--media-09d7b8f9-ab02-4457-b4df-f17b75d4405b\" href=\"http:\/\/v5j22kvl0zh.c.updraftclone.com\/wp-content\/uploads\/2022\/08\/Renergen_Ad-Hoc-Note_11-August-2022.pdf\">Renergen &#8211; CEF Update Note &#8211; 11 August 2022<\/a><a href=\"http:\/\/v5j22kvl0zh.c.updraftclone.com\/wp-content\/uploads\/2022\/08\/Renergen_Ad-Hoc-Note_11-August-2022.pdf\" class=\"wp-block-file__button\" download aria-describedby=\"wp-block-file--media-09d7b8f9-ab02-4457-b4df-f17b75d4405b\">Download<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Share Code: REN \u2013 Market Cap: R4.6bn \u2013 PE: -124x \u2013 DY: 0.0% Central Energy Fund: Due Diligence Successful, Fair Value Implied Following Ivanhoe Mines\u2019 option expiring (see our previous note), questions surfaced about the reason for this expiry &amp;, indeed, whether it involved the quality of the Virginia Gas Project (VGP). Concurrent to Ivanhoe\u2019s [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[100],"tags":[101,60,20,30,16],"class_list":["post-388","post","type-post","status-publish","format-standard","hentry","category-renergen-ren","tag-renergen","tag-research","tag-small-cap","tag-small-caps","tag-south-africa"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/388","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=388"}],"version-history":[{"count":1,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/388\/revisions"}],"predecessor-version":[{"id":390,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/388\/revisions\/390"}],"wp:attachment":[{"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=388"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=388"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=388"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}